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HMRC Liability Imbalance

In this guide we will try to decipher why you are out of alignment and how to rectify the issue.

There are many ways in which you may find yourself out of alignment with the revenue. You may have overpaid one of your employees, not submitted a submission to the revenue, failed to submit an employment allowance claim and many more.

Identifying The Discrepancy

The first thing you need to do is identify why the revenue believes that you have paid too much or not paid enough. The revenue is the best person to speak to, to get an idea as to what figures you need to adjust. If they explicitly tell you that you have not paid enough tax then you can look specifically at your tax figures to narrow down your search.

There are several reports within the QTAC software that you can produce to view what liability the software has calculated you are due to pay. Running the P32 report and the FPS Detail in comparison with your HMRC online dashboard you will be able to identify what figures the revenue has and what figures you have submitted.

FPS Detail Report

This report can be found under “Reports > Pay Period > FPS detail Report”.

P32 Report

This report can be found under “Reports > Pay Period > HMRC Remittance Advice > P32”.

HMRC Dashboard

You can access your HMRC dashboard from the .GOV website. You will need your HMRC username and ID to log into the online account.

This section will show you your YTD that is due for payment

This screen will show you the breakdown of the months in the current tax year

This screen will then show you a breakdown of the individual months. Showing the liability figures in that month.

Once you can see were the liability seems to be stemming from you can start to look into what employee or payment caused the imbalance. For example if you can see the revenue believes you are underpaying NI then you can begin to produce reports that target NI figures. Below is a list of reports that you can run to look at specific types of figures in the software:

P11 Tax – This report is found under “Reports > Employee > P11 Tax”. This produces a break down of the tax figures for an individual employee in each period. You will also be able to see a year to date figure at the bottom of the report.

P11 NI – This report is found under “Reports > Employee > P11 NI”. This report will produce a breakdown of the NI band for each period and also the employee and employer contributions to NI in that period.

Payroll Summary – This report is found under “Reports > Pay Period > Payroll Summary”. This report will show you a brief summary of the employees pay and liability for the selected period(s) showing fields like Net Pay, Gross Pay, Sick Pay and NI for employee and employer.

Payslip Report – This report can be found under “Reports > Pay Period > Payslips” or under “Reports > Employee > Payslips”. This is the report that you send to your employee each period detailing how much they have been paid in that period.

You may need to acquire a spreadsheet from the revenue that details your employees pay year to date. This is a document that the revenue can supply to you. There are several occasions that this will be necessary.

Resolving Discrepancy

Once you have identified the problem you will need to rectify the problem accordingly. This will almost always mean a call to the revenue to make sure that what you are going to do is correct. In some cases like a Nominal Payment you will need to speak to the revenue so that they can update their systems accordingly. Below we look at a few ways of rectifying problems of liability imbalance.

Imbalance From a Previous Year

An error from a previous year will almost always be resolved by sending an Earlier Year Update. In the QTAC software this can be found under “Employee > Earlier Year Update”. By sending an earlier year update you are amending a previous years year to date figures for an individual employee. For more information on how to send an earlier year update see the article Submitting Earlier Year Updates.

If you have found your imbalance is because of Employment Allowance you can submit this from the relevant years software as long as the PAYE scheme has not been closed. This can be done from “Company > Company Maintenance > Tax and NI” see the article Employment Allowance.

Imbalance For Current Year

There are going to be a few ways to rectify an issue in the current year. These different ways will depend on whose fault the issue is and what figures need to be amended to resolve the issue.

There are a few situations were you may find that a period that has been processed on the software does not match what the revenue has. For example if you reprocess a period and do not resubmit, the software will be showing different figures to the revenues system. In any case you must identify what figures are correct for the employee and resubmit the RTI showing the appropriate figures.

The RTI that you submit needs to accurately reflect what the employees were actually paid in those periods. If any adjustments need to be made they will have to be added or deducted in later periods.

If the figures in your software are already correct you can just resubmit the periods to update the revenue with what you believe to be the correct figures.

If the figures you have in your software are incorrect you will need to back process. It is advised that you take a backup first in case any mistakes are made. To back process an employee go to “Employee > Back Process”. Back processing is not reversible without reverting to an old backup so make sure you know exactly what needs to be done before you start.

Once you have back processed to the appropriate period you can rerun the payroll and resubmit the correct RTI. Once again, what you submit needs to accurately reflect what was actually paid to the employees as this is the part that cannot be undone. Any adjustments to pay can be done in later periods.